First Time Home Buyers
First Time Buyers - Rent to OwnAuthor: Gen Wright
If you are a first time home buyer and are feeling a little daunted by all of the task involved in choosing a home and choosing a lender, you are not alone. Many first time buyers often feel overwhelmed by all of the details. Some may even choose to purchase a home they really do not care for because it is all they can afford and many may not purchase at all, for a lack the necessary down payment required to purchase a home. To prevent yourself from being in this situation as a first time buyer, you may want to consider the rent to own option.
When you rent to own, you are simply leasing the home with the option to purchase the home at a later date. One of the main benefits of renting to own is you do not have to worry about changes in the market having an effect on the purchase price. When you choose to rent to own, the price of the property is listed in the contract and it will not change until the contract expires. It is a fixed price. While this can be a disadvantage to the seller if the fair market value of the home goes up, it is, in fact, a great advantage to the buyer.
When you choose to rent to own, there are a couple of factors you must consider in your agreement. The first is the rent premium. This amount should be just a little of the monthly rent and will count toward the down payment on the property should you decide to purchase. When you pay the rent each month, along with your rent premium, you are building up your down payment on the property. There is also the option fee. This fee is, in fact, part of the down payment on the property and is generally between one and five-percent of the purchase price.
You must also consider that if you decide not to purchase the property you have been renting, the seller will get to keep the rent premium you paid to them. The seller would also keep the option fee you paid when you signed the contract. While it is considered a loss to you, it does allow you to the privilege of living in the home during the "option to buy" period. This period of time is usually three years or less and gives the buyer a chance to build up their down payment.
While many people who are looking to purchase their first home are put off at the thought of a rent to own situation, they may not fully understand all of the benefits. It is especially a great idea for those who lack the down payment to purchase a home and will let them build up the down payment slowly, instead of putting down one lump sum. While you do risk losing the rent premium and option fee, it will also allow you the time you need to decide if purchasing the home is the right decision for you.
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First Time Buyers - Learn more about Rent To Own in Detroit, Michigan and Oakland. Wayne County FHA Loans,VA Loans, Down Payment Assistance available.
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